Summary

The State’s plan to privatise a terminal at the Port of Mombasa has run into a legal barrier following a court ruling which faulted the process.

An MoU between the government and Mediterranean Shipping Company (MSC) was thrown in limbo last Friday after a High Court ruled that the amendments to section 16 (1) (a) of the Merchant Shipping Act, which legitimised the privatisation plan, were null and void.

Plan to privatise port terminal hits legal headwinds

The State’s plan to privatise a terminal at the Port of Mombasa has run into a legal barrier following a court ruling which faulted the process.

An MoU between the government and Mediterranean Shipping Company (MSC) was thrown in limbo last Friday after a High Court ruled that the amendments to section 16 (1) (a) of the Merchant Shipping Act, which legitimised the privatisation plan, were null and void.

The ruling has complicated government's efforts to privatise the Sh30 billion Container Terminal Twon(CT2) at the Port of Mombasa.

High Court judges Erick Ogola, Alfred Mabea and Mugure Thande made the ruling in a case filed by the Dock Workers Union (DWU), Taireni Association of Mijikenda and Muslim for Human Rights (Muhuri) challenging the move to privatise the terminal.

"We have found that the enactment of section 16 (1) (a) was unconstitutional and impugned. Even if our finding was to the contrary, the said section 16 of the Merchant Shipping Act would have run into loss because it is retrospective," said Justice Ogola.

On August 26 this year, President Uhuru Kenyatta witnessed the signing of the MoU just a few days after the Merchant Shipping Act 2019 was passed and signed into law.

The President had said privatising the terminal would create jobs, adding that the Kenya shipping line will gain access to more than 500 ports across the world.

In the ruling, the judges found there was no public participation in amending the law.

"We are of the opinion that the public participation was not adequate ... the six days was short and did not meet the requirement of public participation," said Justice Ogola.

The judges said the impugned section 16 was submitted despite President Kenyatta's reservations on the amended section 16 (1) (a).

DWU lawyer Ochieng Oginga said the petition raised pertinent issues of constitutionality and public interest that allows the court to decide whether to allow the case to proceed or not.

The petitioners argued that whereas the same Bill was being deliberated in 2019, in 2014 the government initiated a process for the procurement of a firm to operate and manage the Port of Mombasa.

The process attracted a number of local and international bidders. However, the judge noted that the state failed to adhere to the constitutional principles of transparency, openness and public involvement while making the deal. He also said the government signed an MoU secretly and failed to publish the same within the stipulated seven days.

The judges further accused the government of secretly negotiating the MoU with a foreign private company (MSC) over operations and management of the terminal. By privatising the terminal, they said, Mombasa residents stand to suffer job losses.

The court has lent credence to the claims by those who have all along opposed the privatisation of the terminal. Critics have faulted the rush by the government to move the management of the CT2 from the Kenya Ports Authority (KPA) to the new state-owned Kenya National Shipping Line (KNSL) in partnership with a foreign-owned shipping firm (MSC).

Questions have also been raised on why the details of the deal have been kept away from the public eye. The agreement entered between KPA, KNSL and MSC have remained secret with very little said on concession terms, with MSC seen as the major beneficiary in the deal.

During the signing of the agreement, the government stated that the country would benefit from the foreign firm coming in, as works begin to revive KNSL which has been dormant for more than 28 years.

President Kenyatta said more than 1,500 youth would be trained by MSC to ensure Kenya produces hands-on employees in maritime sector with more than 3,000 people expected to be employed yearly in sea jobs.

Insiders told Shipping that the MSC had committed itself to run berth 21 and 22 at the terminal for 30 years before the agreement is reviewed.

MSC joins five more private companies operating at the Port of Mombasa with their agreements also remaining secret.

Transport parliamentary committee David Pkosing has demanded all agreements entered previously between the KPA and the five companies on the management of the berths at the port obe made public.

But The Kenya Seafarers Union (KSU) secretary general Stephen Owaki said the ruling will not interfere with recruitment of seafarers.

"We know the prayers of the petitioner did not touch the process of hiring the seafarers and there is no need to appeal over the case," said Mr Owaki.